In the first citywide reassessment in three years, the value of the average residential property in Philadelphia increased a staggering 31%, Mayor Jim Kenney’s administration announced Tuesday.

The value of non-residential parcels like commercial properties, which took a hit during the coronavirus pandemic, increased only 9% on average, and the total value of assessed property in the city jumped 21%.

Property owners will be able to look up their new assessments, which will apply to tax bills due March 31, 2023, on the city’s website beginning Monday. They will receive notice of their new valuations by mail by Sept. 1 of this year, and the deadline for filing an appeal with the Board of Revision of Taxes is Oct. 3.

The release of the long-awaited assessments will launch a debate over taxes between the administration and City Council members, who are currently negotiating over Kenney’s $5.6 billion proposal for the city budget that takes effect July 1.

Kenney has proposed using part of the new revenue generated by the increased assessments to pay for cuts in the wage tax, but some on Council are skeptical of relief strategies that do not directly benefit affected property owners.

Not all homeowners will see significant increases. Changes in assessments of the city’s 580,000 properties will vary widely depending on neighborhood, with fast-growing areas seeing spikes well above the average, and other areas seeing more modest jumps.

Tax relief measures proposed

If tax rates and exemptions remained unchanged, the city would generate $92 million in additional property tax revenue next year due to the spike in assessments, and $460 million over five years. But Kenney and Council have said they will pursue significant tax relief programs to offset the increase.

Kenney is casting his plan for softening the blow of the reassessment as revenue-neutral over five years by simultaneously proposing various tax breaks, including increasing the homestead exemption for owner-occupied homes from $45,000 to $65,000, and lowering the wage tax for city residents from 3.8398% to 3.7% over two years. (The plan also includes a minuscule cut in the wage tax for people who work in Philadelphia but live outside the city, from 3.4481% to 3.44%.)

Additionally, Kenney is pitching a 20% increase in funding for the Longtime Owner Occupants Program, which aids Philadelphians who have lived in their homes for 10 years and see a significant jump in their assessments, and a $40 million boost over five years to programs that help people stay in their homes, such as rent relief and the Senior Citizen Tax Freeze program.

“Growing property values reflect well on Philadelphia being a place of choice and represent an opportunity to build wealth for some,” Kenney said in a statement. “But homeowners deserve protections, which is why I am proposing $200 million in new homeowner and rent relief over five years. At the same time, the additional revenues resulting from these rising values present an opportunity to reduce the most onerous of the City’s taxes, the Wage Tax, by $260 million.”

Disagreement over which taxes to cut

The administration’s proposal to soften the impact of the reassessment by lowering the wage tax, as opposed to cutting the property tax rate, will likely set up a showdown between the administration and some on Council, where many members are adamant about keeping property tax bills low for homeowners and leery of cutting the wage tax, a priority of the business community.

Councilmember Mark Squilla, whose 1st District stretches from Pennsport to Kensington and includes many fast-growing neighborhoods, said that the reassessment will be a “disaster” for some homeowners, and he expressed skepticism over Kenney’s plan to cut the wage tax rate using increased property tax revenue generated by the reassessment.

“It’s apples and oranges,” Squilla said. “I’m not saying I oppose the wage tax reduction, but I don’t want to do it on the back of our property owners and our residents.”

Squilla said that the city’s delay in releasing the figures and the tight window between the mailing of the assessments and the appeal deadline could lead Council to vote to stall the reassessment for another year.

“Everything’s going to be on the table, from pausing it to phasing it in to putting safeguards in place to looking at some of the options the mayor proposes,” he said.

A group of six Council members, including Council President Darrell L. Clarke, released a statement Tuesday acknowledging the reassessment and listing strategies lawmakers will consider to reduce its impact, including the homestead exemption, the Longtime Owner Occupants Program, and phasing in tax increases. The list did not include reducing the wage tax.

“These are all options which City Council has previously taken action on to protect homeowners from the impact of rising property taxes,” the Council members said. “We intend to examine every option at our disposal to protect Philadelphia homeowners.”

Meanwhile, a new campaign led by progressive activists, including the group Tax the Rich PHL, is pushing for the city to substantially increase overall revenue to better fund city services.

The group on Tuesday posted on Twitter that it hopes Kenney and Council will “prioritize increasing the homestead exemption over cutting taxes for big businesses, so as to reduce the impact that the reassessment will have on low-income homeowners.”

Why the reassessment was delayed

Philadelphia has long struggled to maintain a fair and efficient system for regularly reassessing property values. After decades of case-by-case exceptions leading to a wildly unfair assessment map, former Mayor Michael A. Nutter’s administration implemented the Actual Value Initiative in 2014, simultaneously reassessing all properties for the first time in decades.

But problems have continued at the city’s Office of Property Assessment. The latest reassessment has been paused since 2019 as the city struggled to implement its new Computer Assisted Mass Appraisal system and encountered delays caused by the pandemic.

The delays forced Kenney to omit proposals on tax rates from his March 31 budget address because the city could not yet say how much property tax revenue it expected to generate. Council initially planned to hold hearings on the reassessment in early April, but the administration requested a delay to finish the valuations.

Those hearings are now scheduled for Monday, with administration officials testifying before the Committee of the Whole at 10 a.m. and public comment on property assessments scheduled to begin at 3 p.m.